Abbey is last lender to axe 100% mortgage

Monday 7 April 2008 19.02 EDT
First published on Monday 7 April 2008 19.02 EDT

Homebuyers will no longer be able to obtain 100% mortgages after Abbey, the only lender still offering them, said it would follow rivals and withdraw from the market from tomorrow.

Abbey said that, in future, first-time buyers would have to put up a deposit of at least 5% to obtain a mortgage. As the average house price is about £186,000, according to Land Registry, it means buyers will have to find a deposit of at least £9,300.

But fears are growing that even 95% mortgages are under threat. Already Cheltenham & Gloucester, Alliance & Leicester and Britannia have capped their maximum loans at 90%. Earlier this week, Halifax reduced its maximum loan from 97% to 95%.

David Hollingworth, a mortgage broker of London & Country, said: "Abbey were hanging on in there offering 100% mortgages when everyone else had departed the market.

"But you simply can't any longer be the last man standing as you get swamped with applications."

Mortgage offers have been withdrawn and interest rates raised across the market as banks face rising funding costs as a result of the global credit crunch and the weakening economy.

Hollingworth said applicants for 95% loans were also finding their credit worthiness meticulously examined and many were being rejected.

One niche product, Bristol & West's First Start, remains in the 100% market, but it offers a specialist guarantor loan that requires a parent to put their name on the mortgage.

In the current mortgage market, even that loan is expected to come under pressure.

"Abbey is seeing high demand following recent competitor moves," the lender said in a statement. "In order to maintain high service levels on the business it writes, it is simplifying its mortgage range and repricing in some areas."